LAN. Corp is sceptical about whether it should convert its all equity capital structure into 34% debt
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Question:
cash flows in perpetuity at $20,100 per year. The firm is tax free and the interest rate on debt is 73%
1. Christie is a shareholder in the firm and owns 100 shares of stock. Determine her cash flow under the current capital stricture assuming the fiam pays out dividend at the rate of 100%
2. Assume christie keeps all her 100 shares, what will be het cash flow under the proposed capital structure of the firm
3. Suppose the firm converts, but Christie prefers the current capital structure How should she unlever fher share of stock to recreate the original capital structure
Related Book For
Corporate Finance
ISBN: 9781265533199
13th International Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
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